Two years ago, four youngsters founded PinkGO convenience store at Tuen Mun Town Plaza, Hong Kong. The company’s accounting records are prepared by an inexperienced bookkeeper. You have been consulted on how to account for the inventory transactions. The following information is available as of December 31, 2011, the fiscal year-end date:
Beginning inventory (250 units) $2,500; Total purchases for 2011(500 units) $6,000; Total sales for 2011 $7,200; Ending inventory (by physical count) 350 units Requirements Answer the following questions:
1. What factors will you consider in choosing between the perpetual and periodic inventory systems? Based on the available data, which type of inventory system (Perpetual or Periodic) is likely being used by PinkGO to account for inventory transactions? Explain your answer.
2. How often do you plan to do a physical count of inventory on hand? What will the physical count accomplish?
Requirements
1. Name several parties that could have been hurt by the actions of Carl Montague.
2. What kind of adjustment to Cost of Goods Sold (debit or credit) would have the effect of boosting earnings?